A whole new generation needs to know about pensions
The latest ONS statistics shows this age-group make up over a quarter of the UK population and are set to play a prominent role in the labour force (2). This generation has entered the workforce in a big way, turning to workplace pensions more than ever, with more workers aged 22 to 29 signing up for a workplace pension since 2013 than any other age group3. This has serious ramifications for employers, and ignoring the mood of the next generation means closing yourself off to two thirds of the young talent pool.
Now in our third year of auto-enrolment, research (1) by Aegon reveals that companies in the UK are responding to this shift, fundamentally changing their workplace pension schemes to suit the increasing number of millennials in the workforce. Almost 90 per cent (87%) have recently made changes to their scheme to suit millennials.
The introduction of auto-enrolment appears to have been the key driver of change, with more than two thirds (68%) of those responsible for the workplace pension feeling a greater duty of care for their employees now that they are obligated to organise a pension scheme on their behalf. For the younger generation however, digital tools are essential to interact with their pension in a way that suits their lifestyle. These younger employees are less likely to expect a job for life, and turnover rates are predicted to rise from 14.6 to 18 per cent by 20184. Traditional methods of engagement are slowly losing their appeal among this digitally-savvy generation, and as a result employers need to think how they can reward and retain talent, and pensions are a part of this. Millennials have grown up with broadband, smartphones, laptops and social media being the norm, and consequently, expect instant access to information. Technology usage is the status quo for communication of this generation, and it’s not surprising that PWC found at least two-fifths (41%) 5 prefer to communicate electronically at work than face to face or even over the telephone.
Modernising pensions for the future
Some businesses have already got the ball rolling, with over a quarter (26%) introducing a more rewarding overall pension scheme to attract and retain young talent, while 23% have adopted digital tools to help young employees manage their contributions. One in five (18%) now provide rewards when individuals increase their personal pension contributions, while a further 15% have broadened the pension options on offer to provide greater flexibility. This move to digital is highlighted by the fact just 4% have ramped up face-to-face or telephone advice in the workplace to suit these younger workers.
Clearly, employers have an understanding of the differing needs of this emerging workforce, but the pace of change in employee structure may be too fast for some, however. Despite two in five (39%) employers believing millennials want digital pension tools, only half this number have recently adopted them (23%).
It’s certainly important for employers to accelerate the integration of technology into the workplace. Digital solutions that provide platforms for engagement that complement millennial lifestyles is a good start, giving people access to view and manage their retirement savings online or on their mobile. Millennials have grown up in an internet-enabled world, with different expectations and values from those of us who grew up offline. They also value immediacy, transparency, flexibility and simplicity. Therefore, in order to foster a greater sense of commitment among millennials, it will be necessary to transform the core dynamics of the workplace. Transforming workplace pensions in a way that suits this cohort, is just the start.
1 Research was conducted by Lightspeed on behalf of Aegon. Total sample size was 508 adults. Fieldwork was undertaken in September 2015.
2 ONS population pyramid
3 ONS 2014 Annual Survey of Hours and Earnings: Summary of Pensions Results, 2015.
4 HaysGroup, Global Employee turnover, 2013
5 Millennials at work - Reshaping the workplace, 2011